Incident: The company released its 2024 quarterly report, achieving operating income of 750 million yuan, a year-on-year increase of 41%, net profit to mother of 60 million yuan, an increase of 147% year-on-year, and net profit after deducting 50 million yuan of non-return to mother, an increase of 170% over the previous year.
The company's revenue and profitability increased significantly in the first quarter. The year-on-year growth rate of the company's Q1 revenue in a single quarter increased from 32% to 41% in 23Q1, the year-on-year growth rate of net profit to mother increased from 98% in 23Q1 to 147%, and the year-on-year growth rate of net profit withheld from 133% to 170% in 23Q1. The growth rate increased significantly. We believe that the main reason is that last year was affected by the overall development of the industry (data center construction progress, energy storage construction progress, etc.). The second half of 2023 and 2024 were accompanied by AIGC's development driving computing power demand, and the prosperity of the data center and other industries increased accordingly. There was a certain cycle gap from the overall rise in demand to order feedback for basic equipment such as cooling, so by the first quarter, the performance growth trend was gradually reflected.
Strong performance growth in the first quarter set the tone for the whole year. Reviewing the company's performance from a historical perspective, it can be seen that there was a clear seasonality over the years. The first quarter to the fourth quarter showed a high trend. The main reason was that the computer room temperature control business had obvious seasonal changes. In particular, the acceptance confirmation of some major projects was concentrated in the fourth quarter. We believe that the company achieved a net profit of 60 million yuan in Q1, setting a new absolute high in net profit for the first quarter in the past nine years, laying a good foundation for subsequent revenue and profit in the second, third, and fourth quarter. It is also verified from the side the rise in industry demand and prosperity. It is expected that it will continue to maintain good performance in the future.
The heat dissipation layout is comprehensive, electronic heat dissipation is gradually increasing, and the full liquid cooling chain capacity guarantees room for subsequent growth. The company is deeply involved in temperature-controlled cooling, and the layout includes not only cooling on the computer room side but also the electronic cooling process inside the server. Cold plates for computing power equipment have begun to be shipped in batches; in addition, the company has product and system solution capabilities for a full chain of liquid cooling, and can also carry out in-depth cooperation with mainstream customers in a complete industry chain such as computing power chips, computing power equipment, computer room companies, and cloud vendors. We believe that the company's excellent performance in the first quarter. In addition to the recovery of the traditional main business driven by AI, it also reflects the gradual development trend of electronic cooling in the future. With the advantage of the full chain of liquid cooling capabilities, it continues to benefit from the development of computing power and maintain a further expansion in the scale of revenue and profit.
Investment advice: We expect the company's revenue for 2024-2026 to be 52/69/87 billion yuan, net profit to mother of 5.2 billion 70/92 billion yuan, corresponding PE of 33/25/19 times, respectively. The company's last round of growth was driven by energy storage, and cooling is an important part of AI computing power. Energy consumption control will become a core issue. Liquid cooling technology is expected to be implemented at an accelerated pace, and the company's revenue is expected to gain new growth momentum and maintain a “buy” rating.
Risk warning: the risk of a price war, the risk of rising raw material prices, and AIGC progress falling short of expectations.